Free Reserves

AAA

DEFINITION of 'Free Reserves'

A measurement of a bank's reserves that is equal to the difference between borrowed reserves and excess reserves. This is the amount which the bank has available to lend to clients. A bank is required by federal law to hold a specific amount of reserves at any given time. The excess reserves are calculated by subtracting the required reserves from the total reserves it holds.

INVESTOPEDIA EXPLAINS 'Free Reserves'

The Federal Reserve can alter the available credit held by commercial banks by either selling or purchasing securities in the open market or by increasing the amount of required reserves to be held by commercial banks. In addition, banks can increase their reserves by borrowing directly from the Fed.

RELATED TERMS
  1. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  2. Net Borrowed Reserves

    A statistic released in weekly Federal Reserve data showing the ...
  3. Non-Borrowed Reserves

    A measure of the reserves in the banking system. Non-borrowed ...
  4. Lagged Reserves

    A method of bank reserve calculation whereby the financial institution ...
  5. Commercial Bank

    A financial institution that provides services, such as accepting ...
  6. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
Related Articles
  1. The Federal Reserve
    Economics

    The Federal Reserve

  2. The Treasury And The Federal Reserve
    Bonds & Fixed Income

    The Treasury And The Federal Reserve

  3. Analyzing A Bank's Financial Statements
    Fundamental Analysis

    Analyzing A Bank's Financial Statements

  4. How The U.S. Government Formulates Monetary ...
    Personal Finance

    How The U.S. Government Formulates Monetary ...

Hot Definitions
  1. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  2. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  5. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  6. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
Trading Center